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72% of the dollar's purchasing power was destroyed in just four episodes

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Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#61

Post by skywhopper »

leche wrote: post #50
znnajdla wrote: post #13

This supports my hunch that the current Iran war creates a lethal trifecta that could potentially cause a dollar collapse. 1. Massive military overspend. 2. Petrodollar squeeze (Strait of Hormuz). 3. Allies pulling out: Europe and the Gulf diversifying both their investments and defense purchases. #1 creates oversupply of dollars and #2 and #3 lower demand. This study supports the idea that wars can indeed destroy pu…

One of the goals of the Heritage Foundation is a weak dollar. They believe they can bring manufacturing back to the US this way. I don't think they're right. I do think they will continue weakening the dollar.

The bigger question is, why is that even the primary goal?

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#62

Post by CrzyLngPwd »

tharmas wrote: post #54
d3ckard wrote: post #43

Earlier quoted context omitted.

This is particularly funny if you consider petrodollar to be a bad deal for US, not a good one. Ironically, if yuan becomes new petroleum currency, it might hurt Chinese long term.

>Ironically, if yuan becomes new petroleum currency, it might hurt Chinese long term. Agreed. Which is why the Chinese do NOT want their currency to become the Petrodollar or world's reserve currency. They know that that is what destroyed US Manufacturing. China wants to maintain their manufacturing dominance. They've seen what de-industrialization has done to the US.

https://www.ft.com/content/c948b978-c22b-44b7-ba3d-4798e641e...

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#63

Post by cyanydeez »

cperciva wrote: post #44

Note that most of this period falls before the modern inflation target was established in 1995. In the past 30 years we've had 75% accumulated annual inflation (aka prices have increased be a factor of exp(0.75) = 2.1) of which 16% (aka 21% of the total) took place during an inflation excursion (which lasted 2.5 years aka 8% of the total time period). If anything the data points at "inflation targeting works and is p…

I believe the broader reason for an inflation target is to increase the value of "doing something" as opposed to "doing nothing" with money. Of course, like most policies, this acts on people with way too much of it and skews the perception of control and locus of control to those entities with too much.

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#65

Post by senderista »

unstatusthequo wrote: post #27
znnajdla wrote: post #13

This supports my hunch that the current Iran war creates a lethal trifecta that could potentially cause a dollar collapse. 1. Massive military overspend. 2. Petrodollar squeeze (Strait of Hormuz). 3. Allies pulling out: Europe and the Gulf diversifying both their investments and defense purchases. #1 creates oversupply of dollars and #2 and #3 lower demand. This study supports the idea that wars can indeed destroy pu…

I think the idea is crash the stock market to force interest rate drop to refinance the massive debt.

Huh? Wouldn't bond yields go up if stocks went down?

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#66

Post by WarmWash »

The value of the dollar over time is largely meaningless unless you are a dollar investor (i.e. sit on lots of cash in consumer tier bank accounts). Generally once you have enough cash that this would meaningfully impact you, you are already beyond sitting on cash.

At the end of the day, the dollar or any other currency, is just a conversion tool for [value created] to [goods/services received]. A ratio of 3/1 is equivalent to a ratio of 300/100, even if 3 and 1 are 99% smaller than 300 and 100. The numerator and denominator can move out of sync, creating periods of strain and arbitrage while they equilibrate, but what really matters is how much xyz you get per hour of work at job abc. And overwhelmingly we are leagues beyond 1914 in that regard.

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#67

Post by Icko »

thisislife2 wrote: post #37
engineer_22 wrote: post #23

Earlier quoted context omitted.

It could also be a play to squeeze China or similar nation dependent on middle east oil. USA semicon production not ready, if there were signals that China was ready for a play on Taiwan maybe this is a gambit to buy some time.

Is China really dependent on middle-east oil? I read that they had been diversifying in preparation for an energy resource fight for some time now. For example, they've massively invested in Solar power generation, are building a 300-400 billion dollar gas pipeline from Russia, already buy a lot of oil to from Russia, and also purchased from Venezuela (though how that's going now is anybody's guess). They also have a…

I saw an article that went really into depth - basically oil has huge diversity, and they really wanted Venezuelan oil:

https://open.substack.com/pub/endtropy/p/trumps-enormous-c-l...

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#68

Post by radlad »

thisislife2 wrote: post #30
znnajdla wrote: post #13

This supports my hunch that the current Iran war creates a lethal trifecta that could potentially cause a dollar collapse. 1. Massive military overspend. 2. Petrodollar squeeze (Strait of Hormuz). 3. Allies pulling out: Europe and the Gulf diversifying both their investments and defense purchases. #1 creates oversupply of dollars and #2 and #3 lower demand. This study supports the idea that wars can indeed destroy pu…

Iran is also playing its own Uno card here by saying that it would consider allowing some oil and gas shipments through the Strait if they have been bought with Chinese Yuan, than the US dollar. ( The Islamic Republic may grant safe passage to oil tankers if the cargo is traded in Chinese yuan - https://www.lbc.co.uk/article/iran-allow-chinese-ships-hormu... ).

I've never heard the expression "to play one's Uno card." Is this a play on "to play one's Trump card"? I can understand why this phrasing could cause confusion, but want to make sure I'm not missing something.

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#69

Post by trgn »

raincole wrote: post #45
cperciva wrote: post #44

Note that most of this period falls before the modern inflation target was established in 1995. In the past 30 years we've had 75% accumulated annual inflation (aka prices have increased be a factor of exp(0.75) = 2.1) of which 16% (aka 21% of the total) took place during an inflation excursion (which lasted 2.5 years aka 8% of the total time period). If anything the data points at "inflation targeting works and is p…

The devaluation also mostly happened during the periods that everyone calls good old times now.

there was wage growth

Re: 72% of the dollar's purchasing power was destroyed in just four episodes

#70

Post by arkensaw »

I'm trying to read this and not feel like an idiot.

Can someone explain to me how post-covid is considered one of the 4 episodes?

it looks to me that the dips at 1933-1936 or 1956-1958 are much more significant - are these just "regular" inflation? Are we ignoring these because we can't tie them to some specific current event?

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